Macmillan Settles E-Book Price Fixing Suit

Last April, the U.S. Department of Justice (DOJ) brought a lawsuit against Apple and five book publishers, claiming these companies had conspired together to fix book prices in order to defeat Amazon. Not looking for any trouble, three of these book publishers settled immediately, leaving Macmillan and Penguin left to fight the DOJ alongside Apple. Penguin reached a settlement this past December. Today, the DOJ has announced they´ve accepted a settlement from Macmillan, leaving only Apple to continue this fight against the DOJ. Given Apple´s courtroom tenacity and stock piles of cash, it´s likely Apple can carry out this fight for as long as they wish. Though they´ve finally decided to settle and end their dispute with the DOJ, Macmillan still claims their innocence in these dealings. “There are two reasons we did not settle earlier,” wrote Macmillan CEO John Sargent in a letter posted on the publishers´ Web site.

“First, the settlement called for a level of e-book discounting we believed would be harmful to the industry. We felt that if only three of the big six publishers were required to discount and we stood firm, those problems might be avoided.” Yet, while Macmillan held out hope their resistance to settle would bring sweeping changes across the industry, the rest of the publishers had decided to settle. In December, Random House settled, agreeing to the same settlement Penguin had agreed to, leaving Macmillan essentially alone with their principals, to borrow a phrase. According to Sargent, continuing to hold out against the industry would have put Macmillan and their customers at a disadvantage for two years.

“The second reason was simple,” Sargent said. “I had an old fashioned belief that you should not settle if you have done no wrong. As it turns out, that is indeed old fashioned.”

One by one, as each publisher settled, the remaining publishers were left to pay their own legal bills and any other resulting legal bills from the case. As the last hold out, Macmillan could have been left with a “breathtaking” bill. Last spring, the DOJ claimed Apple began to court these six publishers in order to work deals to defeat Amazon and their $9.99 price point for e-books. Publishers began to worry Amazon was becoming too large and too powerful, forcing the publishers to meet these price points in order to have their books sold in the largest online e-book store. Apple proposed a plan similar to that used to sell their apps. The publishers could set their own price for books sold on Apple´s iBookstore and take a 70% cut for themselves and give Apple a 30% share. However, Apple also made these publishers promise they wouldn´t sell these books at a lower price anywhere else, thereby placing pressure on Amazon. European Regulators also took these companies to task over their alleged e-book price fixing scheme. In this proposed settlement, publishers would be able to set their own price for two years.